Chinese consumption roars to life in May
Consumption stole the spotlight in May’s macroeconomic data.
Per data released by the stats bureau (NBS) on Monday, retail sales of consumer goods grew 6.4% y/y, up from 5.1% in April.
As per last month, spending growth was focused on big-ticket items. Throughout May, sales of:
- Household appliances soared a thumping 53.0% y/y
- Mobile phones grew 33%
- Furniture expanded 25.6%
- Autos ticked up 1.1%
On a seasonally adjusted month-on-month basis, retail sales surged 0.9% – a marked acceleration from April’s 0.5% m/m growth.
Spending by urban households grew by 6.5% y/y, outpacing the 5.4% growth of their rural counterparts.
- This is the third consecutive month urban spending has grown faster than rural spending – a sign that consumer sentiment in cities is gradually recovering.
- This is a significant development, as urban households drive the majority of China’s consumption.
Get smart: May’s retail sales print was encouraging, but it doesn’t necessarily signal a durable recovery in consumption.
- Much of the strength came from big-ticket items, buoyed by the government’s consumer trade-in program. That suggests the surge in spending is policy-driven and likely temporary, rather than signaling a broad-based improvement in consumer confidence.
- Meanwhile, retail sales year-to-date are up just 4.7% y/y – lagging both industrial output and GDP growth – underscoring the fragility of the consumption recovery.
The upshot: While May’s data shows households are spending again, a sustained rebound in consumption will require several more months of solid growth momentum.
